In a major strategy shift, the Cambridge, Mass. foundation that plans to provide laptop computers to poor children around the globe is asking wealthy individuals and corporations to help pick up the tab by purchasing hundreds or thousands of the machines.
The bid for support from philanthropists comes as the nonprofit One Laptop Per Child Foundation faces manufacturing delays and competing low-cost laptops from commercial vendors that have caused some analysts to question whether the project is in crisis. “I think they’re at a very critical moment,” said Josh Bernoff, an analyst with Forrester Research in Cambridge.
The new program is the foundation’s latest effort to expand the sales of its low-cost machine, called the XO laptop. The machine is intended to sell for $100, once it goes into mass production; for now, it’s priced at $200. The foundation originally expected governments in developing countries to buy millions of the computers for distribution to schoolchildren. But foundation chairman Nicholas P. Negroponte ’66 has acknowledged that cooperation from governments has been slower than he’d expected.
So in September, the foundation for the first time offered to sell XO machines to individual users, on the condition that the buyer pay $399 for two laptops. The buyer gets one, while the other is donated to a child in a developing country.
Now the foundation has begun a program called “Givemany,” for donors willing to pay for hundreds or thousands of XO machines. It’s a three-tiered program. A donor who buys 100 to 999 machines will pay $299 apiece, and choose the institution that will get these machines. But $99 of the price will be used to pay for more laptops, to be distributed by the foundation. Thus, someone who buys 100 machines will also fund the distribution of 50 more laptops.
Donors can also choose to buy 1,000 to 9,999 machines at $249 each, or 10,000 or more computers at $200.
The foundation is still negotiating government purchases of the laptops, and says it’s nearing deals with several countries — “three or four, and more will follow,” said Robert Fadel, the foundation’s director of finance and operations.
But because the foundation has little cash of its own, it needs a lot of paying customers to cover manufacturing costs. “They’ve basically set it up so they have to sell them by the thousands or the millions to these governments,” said Bernoff. “Their whole model is based on their selling them in massive quantities.” Bernoff suggested that the Givemany program may be needed to boost sales to a level that makes the project economically viable.
“This is symptomatic of the fact that the business proposition wasn’t very clearly thought out initially,” said Roger Kay, a computer industry analyst and the president of Endpoint Technologies Corp. in Wayland. “The price point was a little higher than they said, and some of the governments who pledged money, it turned out it wasn’t really pledged.”
Kay said the foundation lacks well-developed distribution channels to deliver the laptops. He also warned that developing countries are often rife with government corruption, and that the foundation has no way of ensuring its laptops will end up in the hands of needy children.
Meanwhile, the foundation has pushed back the date when full production of the XO laptop will begin. Quanta Computer of Taiwan was supposed to start making the machines this month, but the manufacturing launch has now been moved into November.
At the same time, another Taiwanese computer company called Asustek has just unveiled its own entry into the ultracheap laptop market. The Eee PC will cost as little as $299. It runs the free Linux operating system, like the XO laptop. But while the XO laptop is intended only for the poor, the Asustek machine is a commercial product, for sale to consumers worldwide. Besides, the Eee PC is capable of running Microsoft Corp.’s popular Windows operating system, something the XO can’t do.
Last week, an Asustek executive said his company had already won an order for a million of the machines from a country he declined to identify.